I think this is big improvement!  Also you are absolutely right that it easier to modify an existing theme.
Putting that in there (modifying an existing theme) is important and should be very prominent.  
I also think that keeping the minimal setup has some value in the fact that it can demystify the whole process.

What I also would like to add is a note to the effect that if you want to style your personal blog, 
you do not need to use as many variable substitutions.  e.g. you can just hardcode the author, domain name etc.
Of course the default theme needs these, but it can simplify the creation of personal themes if you do not need to worry about that.

Anyway, make all the changes you want and feel are good.  
I do not know when I have time again to go over the document, but when I have time I will checkout your version again.

BTW: if you want another reference for a coleslaw blog in your README, you can add 
http://ironhead.xs4all.nl if you want.

Kind regards, 
Wim Oudshoorn.